The American Consumer Will Never Be Back

 

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  • #20430

    Harris&Ewing Inauguration of air mail service, Washington, DC 1918 That title may be a bit much, granted, because never is a very long time. I might i
    [See the full post at: The American Consumer Will Never Be Back]

    #20431
    rapier
    Participant

    Now maybe I am confused in all this but I’ve tried sporadically to find out how much of China’s dollar ‘savings’ were sterilized. That is when Chinese companies get paid in dollars they go to the bank and exchange them for RNB. Where did the banks, really the Peoples Bank of China, get those RNB they exchanged for those dollars? Chinese companies don’t have much use for dollars since they pay workers RNB and buy their factories and equipment and supplies with RNB. Were those RNB simply printed (an RNB balance created in a bank account) and exchanged for the dollars which were then kept as reserves or to buy Treasury bonds as they did hand over fist in the 00’s?

    In order to sterilize these transactions the PBoC would need to either buy RNB with dollars on the FX market but that never happened in the past because there was no RNB FX market. Or they could have done an offsetting RNB/Dollar exchange internally with onshore financial institutions. In either case a transaction in order to get the RNB to exchange for the dollars.

    If the former then all those Chinese dollar ‘savings’ that bought a trillion of Treasury bonds or are sitting at the PBoC as reserves were not savings but are simply the result of printing. Printing RNB and buying dollars from Chinese companies with therm. I mean how can a million dollars buy Chinese made lawnmowers and then be turned around and buy a million dollars in 10 year Treasury notes with no other transaction in between that were the source of those RNB since the Chinese lawnmower maker now has XXXXXXX RNB and the PBoC has a million in reserves or Treasury bonds.

    That is in essence, someone correct me if I am wrong, the source of a lot of all those Chinese savings. They printed it. If I am way off in all this I will be happy to be corrected. If not then Greenspan, Bernanke and most everyone else needs to be called out as liars.

    #20434
    jal
    Participant

    f-150 xl starting at $24,899 (I remember, the price of a 3 bdr rancher was $25,000)
    f-150 platinum starting at $62,499
    MY “build your f-150 package” came to $80,108.
    That amount would have bought me 4 Mazda cars 15 years ago.
    ( Today, It sells, used, for $5,000)
    I don’t know anyone who would have the money to pay cash for a f-150
    In some towns you can buy a condo for $80,000.

    #20436
    Will F.
    Participant

    I believe that the smart ones are following your model.

    My foolish friends are still amassing debt like tomorrow will be sunshine and lollipops for everyone, never realizing they have not had a raise in 5 years, nor will they likely get one any time soon. Like many, I believe they have reached the “exhaustion” phase of austerity. They don’t have the mental stamina to live within their means, always wanting to “one-up” the Jones’ or get the latest and greatest thing. When the dollar finally adjusts for what we have done to it, they will be right back where they were in 2008 when they had to give back their homes, cars etc, just to buy food and gas was $4-5 / Gallon.

    I think the smart ones are saving, but like most humans a small percentage are planning for hard times like the fable of the ant and the grasshopper. The remainder are the grasshoppers waiting to freeze or starve if the Gov’t doesn’t come in and take from the Ants to feed them and save them again.

    Whether one side or the other comes out ahead, I guess we will see but I would rather have a car I can fix myself, a little food and fuel saved up and some currency that Uncle Sap doesn’t know about, than a line of credit that it maxed out and a bunch of new stuff that will cost $$$ to fix when it breaks.

    As for the $80K F150. No thanks. They are nice, but I can get from point a to point b in my $10K car just as well, it runs just fine, has airbags and abs, and is paid for.When it breaks I use my $1k car to get the parts to fix it and live on without owing anything to a bank or the Gov’t for the privilege of being in debt.

    As for savings….I don’t have any in a bank since I like to have the ability to do what I want, when I want, not wait for a banker to allow me the pleasure of using my own money at their whim. The real savings in life is passing knowledge on to others and learning to live without the things that drain our energies without returning anything more than depreciation.

    #20440

    rapier, you’re spot on, they printed it all and then use it not only to buy dollars but also to go buy assets abroad, land, homes, Athens harbors, you name it.

    I’ve called it Monopoly money many times. And that’s all it is. The west is crazy to accept it. Then again, our money too is Monopoly.

    #20442
    Ken Barrows
    Participant

    I think savings are measured by the USA is income less consumption. So $5,000 income and paying a monthly debt of $500 for past credit cards is 10% savings.

    #20443

    Since the American consumer will never be back, and I see no reason to doubt that assessment, the US economy is doomed as well: 70% of GDP comes from that same consumer. Keep that in mind when you read the next batch of ”just around the corner” statements. If and when 70% of GDP depends on people borrowing more than they already have, you’re looking at something that’s beyond repair.

    #20444
    laodan
    Participant

    Some facts about China that ask for a recalibration of our perception of that country:

    – total bank deposits at the end of 2014: approximately 120 Trillion Rmb (approx. 20 Trillion USD)
    – total gold reserve at the end of 2014: 16,000 tons (see https://www.zerohedge.com/news/2015-04-09/spelling-out-big-reset)
    – total home ownership: approximately 90% of all Chinese families own their home (mortgaged homes represent an insignificant percentage of the total)
    – total bank reserves: large commercial banks in China are required to put aside 20 percent of the total deposits they receive as reserve which means that they have the equivalent of some 4 Trillion dollars in reserve
    – total government’s ownership in enterprises (market cap): I know of no reliable figures. But if the state were in urgent need of cash it could easily collect trillions of dollars by selling a stake of its ownership.
    – foreign reserves: 4 Trillion USD
    – money creation: it is in the hands of the state which allows it to create money according to the natural expansion of the economy… by injection in public works.

    How do these factors stack in comparison with the US or the EU?

    #20445
    Raleigh
    Participant

    “60% OF CHINESE EXPORTS TO THE U.S. ARE FROM FOREIGN-OWNED CORPORATIONS

    “’Foreign owned global corporations account for 60% of Chinese exports to the US.’[1]
    Did you know this? How many people understand that this means that non-Chinese corporations are responsible for the trade imbalance between the US and China.

    Who does know this?

    Not Bernanke and Greenspan who are reported to be blaming the “high-savings countries in East Asia” for “the immense pool of [global] liquidity” (particularly in the US). [2]

    But who is creating this gigantic pool of liquidity? Economist Enzio von Pfeil has pointed to problems with the official [US] Treasury records that detail the owners of US ‘foreign’ debt – “there appear to be no data available on how much U.S. Treasury debt is held by U.S. MNCs”. What, he says, do U.S. MNCs do with at least a portion of all of that money they are making in their fabulously successful overseas operations? [3]

    Not Barry Eichengreen who holds the title of the George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley, where he has taught since 1987.[2], [4]. He says that “Whether [or not] there is a permanent reduction in global imbalances will depend mainly on decisions taken outside the US, specifically in countries like China.” [2] Well, how can that be? If China, itself, is not responsible for the great outflow of goods to the US? […]

    How important is it to get the facts of world trade right? Is trade between subsidiaries of the same transnational corporations trade at all?”

    https://econospeak.blogspot.ca/2009/05/60-of-chinese-exports-to-us-are-from.html

    #20446
    Formerly T-Bear
    Participant

    @ Raleigh reply # 20445

    Not an unexpected fact given labour arbitrage practiced as a financial imperative, it certainly is not an economic imperative. To access the Chinese labour resources, investment in capital resources (e.g. factories, materials and management) is required au priori; your fact reflects that ownership or effective ownership in conjunction with Chinese politically imposed ownership and control. Profits derived flow both to China as well as to their foreign corporate ‘guests’. Corporate accounting takes care of cloaking those flows which never seem to appear in credit to the corporate stockholders but bolster the numbers for upper management renumeration. The school of ledger-desmane – control of the books. That is the world as it is.

    #20458
    Bertie W.
    Participant

    Since the American consumer will never be back, and I see no reason to doubt that assessment, the US economy is doomed as well: 70% of GDP comes from that same consumer. Keep that in mind when you read the next batch of ”just around the corner” statements.

    I can only hope the media is not going to subject us to the 1930’s catchphrase, “Prosperity is just around the corner,” in the 2010s. : /

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